Bunge cuts e.p.s. guidance after quarter

July 29, 2010
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by Jeff Gelski

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WHITE PLAINS, N.Y. – Bunge, Ltd. share prices had dropped 12% in the late morning Thursday when compared to Wednesday’s close after a disappointing second quarter led the company to lower its earnings-per-share guidance for the fiscal year.

Bunge reduced its full-year earnings guidance to $3.25 to $3.50 per share, said Jacqualyn Fouse, chief financial officer. The previous e.p.s. guidance was $5.30 to $5.80 per share.

Bunge Ltd. stock was trading at $47.50 per share at about 10:30 a.m. eastern daylight time (E.D.T.) on Thursday. The stock closed at $53.97 per share on Wednesday and opened at $48.82 per share on Thursday. Companywide second-quarter net sales of $10,974 million were comparable to $10,994 million in the previous year’s second quarter.

Second-quarter net income of $1,778 million, or $11.25 per share, actually was more than five times the previous year’s second-quarter net income of $313 million, or $2.28 per share. The company reported a gain on the sale of fertilizer nutrients assets of $2,440 million in this year’s second quarter. Bunge on May 27 closed on a transaction for cash proceeds of $3.9 billion under which Vale, a global mining company based in Brazil, acquired Bunge’s fertilizer nutrient assets in Brazil.

“The second quarter was disappointing, due primarily to low volumes and margins in Agribusiness,” said Albert Weisser, chairman and chief executive officer, when results were given Thursday. “We expect significant improvement in the second half of the year. In Agribusiness, demand should be stronger and Northern Hemisphere harvests will contribute to new market conditions.

“Sugar and ethanol production will peak as the harvest progresses and sugar content yields improve, and fertilizer will enter its seasonally strong period in the Southern Hemisphere.”

The Edible Oil Products segment suffered losses before interest and taxes of $13 million in the second quarter, which compared to earnings before interest and taxes (EBIT) of $10 million in the previous year’s second quarter. Restructuring charges of $2 million, mostly related to the consolidation of Brazilian operations, adversely impacted results. Second-quarter sales increased 7% to $1,578 million from $1,472 million.

For Milling Products, second-quarter EBIT was $1 million, down from $14 million in the previous year’s second quarter. Higher corn milling results were more than offset by lower wheat milling margins due to increased local competition as a result of a large Brazilian wheat crop. Second-quarter sales increased 2% to $386 million from $377 million.

For Agribusiness, second-quarter EBIT was $28 million, down from $419 million in the previous year’s second quarter. Second-quarter results included $4 million of restructuring charges related to the consolidation of Brazilian operations. Second-quarter sales dropped 6% to $7,406 million from $7,902 million.

“Results in oilseed processing, grain origination in distribution in all regions were lower than those of an exceptionally strong period last year,” Bunge said. “Slow farmer selling, combined with stronger than expected soybean export demand from China and excess capacity in some regions, created a tight supply situation that pressured margins in South America and the U.S.”

For Sugar & Bioenergy, second-quarter EBIT was $4 million, down from $13 million. Second-quarter sales leaped 140% to $963 million from $402 million.

For Fertilizer, second-quarter EBIT was $2,369 million, which compared with losses before interest and taxes of $53 million in the previous year’s second quarter. Higher fertilizer results were due to the gain of the sale of the Brazilian fertilizer nutrients assets. Second-quarter sales fell 24% to $641 million from $841 million.

Companywide for the six months ended June 30, Bunge Ltd. had net sales of $21,319 million, up 6% from $20,192 million over the same time period of the previous year. Six-month net income was $1,841 million, up from $118 million.

“Looking forward, U.S. crops are progressing well with a potential for record production of corn and soybeans, which would provide our grain operations ample supplies to originate, store and transport,” Ms. Fouse said. “The global crushing environment is more challenging than expected. However, farmer selling has normalized, and better meat industry economics and oil demand from the edible oil and biodiesel channels should provide support for improved conditions later in the year.”

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